Greece – EU Bailout and Austerity

February 8, 2012

By Padmini Arhant

European contagion originated from the Mediterranean country – Greece.

Last year EU monetary assistance with €110 billion tied to untenable terms and obligations rendered the expectations beyond normal scope.

Accordingly, Greece is still struggling to overcome economic woes despite severe austerity and political reshuffle.

The earlier government under Prime Minister George Papandreou efforts to contain the rising debt and,

EU pressure to prioritize deficit trimming through rigorous spending cuts evidently led to GDP contraction by 6%, budget deficit at 10% and 18% unemployment respectively.

In the poor economic growth rate and looming financial liabilities, the creditors conditional offer demanding drastic expense reduction directly affects the core revenue base – consumers and taxpayers.

The attempt on deficit control without income is enforcing mandatory borrowing and,

Massive cuts in vital services cripples the economy to the point of diminishing return.

Tax hikes at any level could exacerbate the burgeoning crisis especially with unprecedented layoffs in both public and private sectors leading to industry workers as well as state employees nationwide strike.

Instead Greece and other economies like Spain, Portugal, Italy and Ireland in euro zone would enormously benefit from job-oriented investments incentivized with tax breaks, guaranteed dividends and equity enhancement to prospective investors.

European Central Bank, IMF and other international banks capital infusion with strict recommendations result in joblessness.

Funds directed towards economic sector for job creation would stimulate economy facilitating income source to meet budget and payments on borrowing.

Short term fund raising through treasury bills and bonds enables survival amid speculations on financial liquidity.

The propositions on Greek’s private debt write off up to 70 percent or more would provide relief in deficit management allowing appropriations towards economic recovery.

However, EU, ECB and IMF loan stipulations on €130 billion or ($171 billion) over and above cuts agreed to about 1.5 percent of GDP by current Prime Minister Lucas Papademos is the repeat of erroneous policy that precipitated economic and financial meltdown across Europe.

IMF’s similar strategy with Romania dependent on credit for state budget commitments contributed to economic downturn due to extreme lending criteria.

Financial institutions and monetary organizations purpose is useful in building economies applying generic and specific models to address individual requirements.

Greek economic surge and financial recuperation could be supported with job restoration via domestic and foreign investments qualifying the G-20 favored globalization concept.

Under same auspice, trade activities promoting exports would revive manufacturing, service and retail industry besides boosting small medium enterprise competitiveness.

Although financial assistance are necessary to restitute state solvency and credit rating,

Finance industry, corporations and wealthy entrepreneurs in Greece could ease the burden on the economy alongside government initiatives to salvage the situation.

The economic resurrection with prudent investments would need modification for a vibrant Market economy.

Market economy – 80% and Government managed programs – 20%

While the bulk of the economy would fall under free market system with oversight to prevent past mistakes responsible for the status quo,

Preserving core social programs under State purview are important for sustenance and they are –

Pensions, retirement savings or Social Security,

National Health Care with options

Veterans Affairs including rehabilitation and care,

State funding for affordable education, scientific research and technology,

Subsidized housing to accommodate non-qualifiers in the regular home finance.

Public services utilizing technology to the maximum potential and,

Environment protection agency to co-ordinate on national and international mandate.

Stringent laws against corruption within society beginning with government bureaucracy, finance sector and across the economic spectrum could yield financial savings.

Tax reform closing tax evasion loopholes and unaccounted funds or hidden assets retrieval from domestic and overseas bank accounts.

Market economy with life saving programs under government ambit could be a profitable and secure synergy complementing one another.

Greece in euro zone has shared gains and losses with euro fluctuation prior to economic recession.

The impact on Greek economy from euro volatility could not be discounted in the European trade.

The perception of Greece membership in euro zone as a liability could be transformed into an asset in reality with appropriate rescue package designed for economic progress than financial bailout.

Unlike the previous aid, EU approval of €130 billion to Greece in the interim could set the frail economy on trail with fiscal, trade and monetary policy restructuring for better economic performance.

With political elections on the horizon, Greece could experience economic productivity through local and foreign investors recognition of lucrative deals available at the present time.

Greek government relentless pursuits in energizing the economy would minimize ambivalence among creditors reversing the trend in capital provision.

EU, ECB, IMF and global finance to Greece on feasible conditions would deliver positive outcome strengthening euro zone and the member states economy.

The distinction between banks bailout and assistance to weak economy is the beneficiary with former was top 1% whereas the latter represented by 99% in the society.

Considering the predicament and inter-dependency in global economy,

Greece and other nations could not be abandoned or challenged with extraordinary conditions detrimental to euro zone and EU economy.

The leaderships and authorities at EU, ECB, IMF, International banks and euro zone are urged to kindly extend financial credit to Greece with a new opportunity to rebuild the economy and organize fiscal house in order.

Prime Minister Lucas Papademos , the opposition leader Antonis Samaras and all other elected members,

Notwithstanding, the economic leaderships in Greece are confronted with daunting tasks ahead.

The consensus in public and national interest would reflect the political will to resolve the persistent financial problem winning republic confidence and creditors trust in the capital market.

Good Luck! To citizens of Greece and the government in prevailing in financial and economic security.

Peace to all!

Thank you.

Padmini Arhant


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